A cash register is seen with currency in pounds sterling and euros in the cash register in the border town of Pettigo, Ireland on October 14, 2016. REUTERS / Clodagh Kilcoyne

Jan. 10 (Reuters) – The British pound hit its highest level against the euro since February 2020 on Monday amid interest rate hike expectations and fears about the negative impact of the Omicron variant on the economy.

Analysts said the currency had strengthened since mid-December, as the UK government’s resistance to further COVID-19 restrictions gave sentiment a much-needed boost.

Britain has focused on rolling out booster vaccinations – which have reached over 60% of the population – rather than demanding a return to lockdown measures. Read more

Meanwhile, investors have stepped up expectations that the Bank of England will raise interest rates as early as next month after a surprise hike in December.

“We expect a decent release of UK GDP for November of 0.4% on a month tomorrow tomorrow, which should maintain expectations of a further Bank of England rate hike on February 3,” analysts said. ‘ING, recalling this day-to-day indexed swaps (OIS) market. price an 80% chance of a 25 basis point hike.

A preliminary estimate of UK gross domestic product for November is due on Tuesday.

The British pound fell 0.1% against the dollar to $ 1.358 at 9:03 a.m. GMT, close to its highest level since November 2021 at $ 1.3599 hit last week.

It was 0.2% higher at 83.38 pence per euro, after hitting its highest level since February 2020 at 83.34.

The pound entered 2022 “with a tailwind of cautious optimism; the market will take a close look at Omicron data and any immediate indication of Liz Truss’ areas of focus, as an indication of the tone taken by the Bank of England in the first quarter, ”said Joe Tuckey, FX analyst, Argentex.

Foreign Minister Liz Truss is Britain’s main negotiator with the European Union on trade with Northern Ireland following the resignation of Brexit Minister David Frost.

Truss said ahead of talks with the European Union on post-Brexit trade deals that the UK is ready to take unilateral action to suspend customs controls on goods going to Northern Ireland. Read more

Report by Stefano Rebaudo; Editing by William Maclean

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